September 07, 2010
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Home > Overseas Market Situation > Romania
India Trade Promotion Organisation
Commercial and Economic Report 2004
Economic overview of the host country (with relevant economic indicators and statistics)
The Romanian economy showed many signs of improvement and positive development in 2004 and international organisations appreciated Romania's achievements:
  • In November 2004 Fitch, the international rating agency, upgraded Romania's Long-term foreign currency and local currency sovereign ratings to ‘BBB-‘ (BBB minus) and 'BBB’ respectively, from ‘BB’ and 'BB+'. At the same time, the Short-term rating and Country Ceiling are upgraded to 'F3' from 'B’ and to 'BBB-' (BBB minus) from 'BB,' respectively. Following the upgrade, the Outlook is now Stable. Also, In September Standard & Poor’s raised its long-term foreign currency sovereign credit rating on the Republic of Romania to 'BB+' from BB'. At the same time, the long- and short-term local currency sovereign credit ratings on Romania were raised to 'BBB-‘ and 'A-3', from 'BB+' and 'B', respectively. The outlook is stable.
  • In its Country Report on Romania released in October, the EU acknowledges that Romania has a functioning market economy.
Economy in figures
Indicators 2003 2004
Real GDP rates 4.9 8.1*
Industrial production (average-%) 3.4 5.4*
Unemployment rate -% 7.2 8.1 **
Exports FOB -Euro billion 15,614 17,376**
Imports CIF -Euro billion 19,569 23,651**
Trade balance -Euro million -3,955 -6,275**
Inflation rate -% 14.1 8.6
*01.01.2004-30.09.2004
**01.01.2004- 30.11.2004
Economic policies (including trade policies of the host country highlighting its regional agreements and arrangements and their effect on bilateral economic relations with India)
Tax reform: Starting with January 1, 2005, a major fiscal reform package is applied in Romania following the adoption of the Government Emergency Ordinance No. 138/30.12.2004 (O.J. No. 1281/30.12.2004) for modifying and amending the Law No. 571/2003 regarding the Fiscal Code. The most important measure is the introduction of a flat rate of 16% for corporate profit tax (as compared to 25% so far) and for personal income tax (as compared to a progressive tax system with rates ranging from 18% to 40%). The main reasons for the new fiscal regime were the need to consolidate the foundations and mechanisms of the free market economy, to support the private entrepreneurship by creating a more favorable environment for investments and generally for business, to boost employment and to simplify the fiscal procedures. The tax relaxation was also necessary because the relatively high tax burden generated rigid developments in the past; hampering the restructuring of the domestic demand, while keeping hidden parts of the economy away from the national accounts. The Government Emergency Ordinance provided also measures to compensate the possible initial decrease of the budget evenues. Prime Minister Calin Popescu- Tariceanu presented the new regime and especially the flat rate of 16% not only as an important economic measure, but also as "a long awaited justice act for all Romanians, regardless of their incomes".
New regulations regarding foreigners in Romania: The Government approved a bill for the modification and completion of the emergency decree relating to the status of foreigners in Romania, in an attempt to increase efficiency in the enforcing of the decree and to harmonise Romanian migration legislation with the relevant European regulations. The bill introduces the notions of resident and permanent resident foreigners. Under the new bill, the relevant authorities may decide, whenever the case may be, about granting and suspending short-tern: concessions for the entrance right, as well as about prolonging the stay rights for certain categories of foreigners. The bill also provides for foreign employees dispatched to Romania to qualify for one-time prolongation of the stay right that is limited to one year. Any further prolongation will be subject to the legal provisions for foreigners employed in Romania. Permanent stay rights will be granted, upon request, for an indefinite time to the holders of temporary stay rights whose settlement rights have been approved. The bill will be submitted to Parliament for further debates and final approval. The foreign citizens with the status of shareholders who seek an extension of their right to stay in Romania with a view to carrying out commercial activities must produce documents proving that their future investments will amount to at least 70,000 euros or that they will generate at least 15 new full-time jobs. The amount can be placed as a capital contribution, or as a transfer of technology. The requirement for a foreigner who is a partner in a Romanian business to have his stay right extended for commercial activities is that his investment to be at least 50,000 euros or that he should generate at least 10 full-time jobs. Under the bill, the foreign citizens who received the right to permanent residence in Romania enjoy the same rights as the Romanian nationals, including the same tax exemptions, the right to acquire housing or to join an employers' or trade union organization.
  Romania -EU agreement on agriculture quotas: Negotiations with the European Union bilateral trade regime for basic agriculture products were concluded, and the quotas exempt from payment of customs duties were set. For the export of Romanian agriculture products to the EU, the two parties agreed on the full liberalisation of basic agriculture product trade, except for certain products for which specific incentives were agreed. Romania benefits from quotas exempt from customs duty payment for poultry meat (9,000 tons), pork (15,625 tons), beef (4,000 tons) and meat products (2,125 tons of pork products, 1,200 tons of poultry meat products and 500 tons of beef products). Also, EU receives an annual livestock quota of 46,000 capita (bovines). In the dairy sector, apart from the current cheese quota (2,800 tons, with an annual 10-percent increase) quotas were agreed for milk powder (1,500 tons) and yogurt (1,000 tons). Romania also benefits from customs duty exemptions on all categories of grains (wheat-230,000 tons, maize-149,000 tons, barley-89,000 tons, oat-7,000 tons) and on flour (18,000 tons). Also, the wine quota was increased to 345,000 hectolitres and five new stages will be introduced until enforcement of prohibitive customs duties on fresh fruit and vegetables (potatoes, cucumbers, pumpkins, peaches, apricots, apples, pears, strawberries etc.). As far as imports are concerned, the current trade regime is maintained for a series of products (beef, grains, cheese and milk powder, mushrooms, etc.) whereas for certain categories current customs duties were raised (poultry, sugar, malt etc.).
CEFTA trade regime replaced with European Agreement: The trade regime applied by Romania to the 10 member countries of Central European Free Trade Association (CEFTA) is now the one of European Agreement as CEFTA dismantled. Moreover, the trade preferences which were applied to some of the CEFTA member countries are replaced with the trade preferences stipulated by the European Agreement. The trade relations with Poland, Hungary, the Czech Republic, Slovakia, Slovenia, i.e. the states that concentrated the highest share of the CEFTA trade, resulted in a trade deficit that highlights the disparities between Romania and these states in terms of goods competitiveness. The change in the trade and customs regime would not be beneficial to foreign trade business operators, as the European Agreement rules are more rigid compared to CEFTA ones. Thus, now there are more restrictions in terms of quality, eco-friendliness, metering etc.
Bilateral relations (institutional arrangements, agreements, high level visits)
  • State Visit to India by the President of Romania: At the invitation of the President of India, Dr. A. P. J. Abdul Kalam, H.E. Mr. Ion Iliescu, the President of Romania, paid a State Visit to the Republic of India from 29 January -1 February 2004. During the visit, President Iliescu met with the President of India, Dr. A. P. J. Abdul Kalam, the Prime Minister of India, Mr. Atal Bihari Vajpayee, the Minister of External Affairs, Mr. Yashwant Sinha, and the Leader of Opposition in Lok Sabha and President of the INC, Smt. Sonia Gandhi. President Iliescu also visited Mumbai, Bangalore and Agra. In Mumbai and Bangalore, President Iliescu had meetings with senior representatives of Indian business and industry, in particular CII (Confederation of Indian Industry) and FICCI (Federation of Indian Chambers of Commerce and Industry), and visited INFOSYS in Bangalore. The following four documents were signed during the visit: Agreement on Visa Free Regime for Diplomatic Passports Holders; Agreement on Cooperation in Plant Protection and Phytosanitary Quarantine; Memorandum of Understanding between Romanian Television and Doordarshan; Memorandum of Understanding between Romanian Broadcasting Corporation and All India Radio.
  • In September 2004, former Prime Minister and Reserve Bank of Romania Governor
    Mugur Isarescu visited India.
  • In September 2004, Minister for Communications & Information Technology Thiru Dayanidhi Maran visited Bucharest for the 23rd UPU Congress and held bilateral discussions with his Romanian counterpart.
Bilateral trade
Bilateral trade: India-Romania trade, which, declined in the 1990's, is again on the Upswing. It has grown from a low of US$ 68 million in 2000 to US$ 101.2 million in 2002, and by a further 30% to $131.6 million in 2003. For the first eleven months of 2004 the bilateral trade totalled USD 231.2 million. India's exports to Romania amounted to USD 108.9 million while import from Romania was USD 122.3 million. Projecting the eleven months data for 2004 over twelve months, India-Romania trade in 2004 is estimated to be US$ 253 million.
In US $ millions
  2000 2001 2002 2003 2004*
Export 29.5 32.1 53.0 78.1 120*
Import 38 38.9 48.2 53.5 133*
Total 67.5 71.0 101.2 131.6 253*
*Projection of 11 months data for 12 months
 To tap this growth potential, India and Romania have identified the sectors of information technology, pharmaceuticals, energy, metallurgy and heavy industries, for special focus while strengthening our bilateral trade and economic ties. These are fields in which both countries possess world-class expertise that we are ready to share with each other.
Top Indian export items to Romania are: Iron Ore; Pharmaceuticals, including Antibiotics; Chemicals; Cotton Yarn, Woven Cotton Fabrics, Made-ups, etc; Plastic & Linoleum products; Machinery and instruments; Kitchen and household articles; Sesame seeds; Electric cars.
Top Indian import items from Romania are: Iron & Steel products; Organic and Inorganic Chemicals; Metals and Metal Scrap; Machinery; Non-ferrous metals; Gas turbines; and Project goods.
Bilateral trade issues
Agreements under negotiation: A Maritime Transport Agreement and a Veterinary-Sanitary Agreement are at an advanced stage of negotiation, while a Double Taxation Avoidance Agreement is in the pipeline. Also under consideration are proposals to sign an updated Cultural Exchange Programme, an Education Programme, and a new Bilateral Programme on Cooperation in Science and Technology.
 
   

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